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E-commerce 2.0: the shape of shops to come

By: Craig Walmsley, Director of Strategy, AKQA New York, 22 May 2007

Prediction is a notoriously tricky business, especially when it comes to something as open, diverse, complex and bewildering as the Internet. Look too far ahead and you sound like a crazy-person, look too close to home, someone is already doing it, and you sound “so 20 minutes ago”. Nonetheless, there are some deep-seated changes in the industry that, sooner or later, are going to make an impact on the practice of digital commerce as it currently stands. Some of these changes are driven by new technologies, some by the mainstreaming of currently niche activities, and some in the way that companies are re-engineering their delivery of customer experiences. All of these will influence the way that we go about finding, choosing and buying online. So, sticking-out-neck time:

“Kaizen”

With increased online purchasing comes increased revenue. Increased revenue means increased investment. With increased investment, comes larger projects, more project stakeholders, more formal project management and more project oversight. This produces glacial change, project stagnation and a focus on process rather than product. So, for example, the next site update is built into the IT department’s release schedule, and adding that shiny new site button will take approximately 12-24 months, rather than the 12-24 days you were hoping for. With no obligation for a customer to buy from any online store, sites that cannot deliver rapid change in their customer experience will take a beating when customers move elsewhere. Businesses will be forced to adopt “Kaizen” in approaching their site development. A Japanese methodology for business process enhancement, “Kaizen” means “continuous improvement” – anyone can suggest an incremental improvement, which is then implemented, measured and, if successful, integrated into the business. In digital, large-scale pre-planning and exhaustive project scheduling will be replaced by small-scale experimentation, which can be rapidly adapted as new improvements are suggested. All of which makes even more sense, since site owners will have to:

Think Small

Everyone is sold on the notion of “the Big Idea” – “the ‘ground-breaking’, ‘paradigm-shifting’, ‘out-of-the-box-thinking’ innovation that will change everything!”™ This seems to be an almost religious belief in the transformational power of predictive reasoning. This “theology of creativity” is naturally undercut by nature’s own rather more successful form of design innovation – evolution. With sophisticated site tracking and analytics technologies, site owners can now monitor the impact of even the smallest change in user behaviors when developing new features by A/B testing. The close monitoring of comparative analytics allows site owners to continually improve their site, incrementally increasing performance in small steps over time. Rather than a “creationist” determination of what is successful, the “natural selection” of user behavior will generate the most successful sites. By thinking small, testing, measuring and improving, innovative site owners will significantly enhance their ecommerce system in the way that Darwin intended. This means that:

UE Beats IT

This “Micro–Kaizen” approach will rely upon organizations being quick, nimble, and customer-focused. There has always been a tension between traditional IT and the more experimental attitude of web designers and developers. Companies with the scale to create significant E-Commerce capabilities habitually allowed the IT divisions to beat the web-developers into submission with their “ISO-Certified software development project governance methodologies”. This will happen less and less often, for 2 reasons. Firstly, User Experience is much more of a competitive differentiator than E-Commerce infrastructure, which has become something of a commodity. Second, the IT divisions have finally (and thankfully) put in place systems flexible enough to deal with a separate and an ever-changing web-presentation layer. User Experience considerations will now be the number one driver in business decisions surrounding site design, and User Experience specialists (who finally have the management on their side) will start to have the pleasant sensation of beating the IT department for their inflexibility. This will definitely help change the way we buy online, because it’s about time for:

Shop 2.0

The Web 2.0 revolution has seemingly allowed any part of someone’s life to be put online – photos, thoughts, video clips, friendships – anything that can be shared will be shared. But if the user’s existence online has been revolutionized, one area of their lives has seemingly been left behind – the way they buy. You can’t share products or services online, you can’t present an AJAX snapshot of a product you are interested in on your blog, you rarely get recommendations based on more than a purchase history. Smart retailers will begin to fill this void for their product lines by allowing people to share the same in-depth information and visuals, reviews, related products and purchase options that are currently available on their E-Commerce sites. Properly branded and distributed, these new sharing tools will allow people to access detailed product information on their own blogs, myspace pages and wherever else seems entertaining. Available to all, developers will blend these Shop 2.0 capabilities together with other Web 2.0 tools to create new online services. This will provide a means to build a new standard for federated E-Commerce, ushering in a new form of syndicated online sharing and purchasing. eBay is leading the way in pushing Web 2.0 into commercial application with its new “ToGo” Flash widgets that allow people to share a listing on their own site. Retailers may also be able to tap into more personal data to generate more specific purchase recommendations. iConcert Calendar, a plug-in for iTunes, presents unique recommendations for concerts based on the music that a person has in their iTunes library. Such rich federated content and data services will also provide the platform for a new kind of:

Immersive Advertising

Online advertising has never matched the visual depth and impact of print. In offline fashion, automotive, entertainment, and even technology publishing, advertising at its best is a complement to editorial. In online, this has never been the case. When confined to small areas on a page, it creates visual clutter. When given more room as an overlay or interstitial, it is intrusive and annoying. However, with consumer’s attention rapidly shifting online, and advertising dollars following, there is significant pressure to improve the way that advertising is managed and displayed online. Matching this pressure on advertising, comes new competition in Internet technologies. Adobe Flash, so long the sole standard in immersive Internet display formats, will soon be facing significant competition from Microsoft’s SilverLight, which has better video support, better search “indexibility” and improved backend integration. This competition will intensify the pressure to create new ad formats. The most obvious examples would be interactive “mini-mercials” sitting behind simple display advertising. As well as enhanced video display, users can better interact with products in the ad, zooming into the clothes in more detail and from several angles, listening to samples of every album track, configuring a personalized product, or purchasing directly from the ad. The technologies that drive “Shop 2.0” will also power these new advertising formats. Similar developments may impact nascent IPTV services – new forms of advertising and merchandising are already being trialed by Amazon and Joost. (Though how amenable users will be to interrupting and breaking out of the narrative stream of video remains to be seen.) Finally, larger displays are creating more “spare” real-estate outside of the standard site layout. These large areas of screen, and the accompanying bandwidth to fill them with rich content, will create larger display advertising and sponsorship formats, and a more “magazine-like” feel. Commerce will thus start to spread from company sites to the Internet as a whole, and then from the Internet to…

Mobile Purchase

In the 80s, McKinsey advised AT&T that the entire global market for mobile phones would be 900,000 people. It is for this reason that AT&T willingly gave away its wireless licenses to regional companies when it was split up in 1984, and why the mobile market is so fragmented in the country that invented mobile phone technology. This is also the reason that the nation with some of the most innovative E-Commerce has largely ignored a customer-touchpoint that is these days personal, highly capable and more or less omnipresent – there are upwards of 200 million mobile phones in the United States and some countries, including the U.K. now have more mobile phones that people. The technologies that allow phones to bridge the online and offline worlds have long existed. Programs like Delicious Monster use scanning technology and publicly-available barcode data to identify individual products and gather information about them from online services. In Japan, a much more sophisticated mobile market, Amazon built a “scan to price” service several years ago. Mobile phone users could take a picture of a barcode on anything, and Amazon Japan would tell them how much it was online. Nothing like this has ever been released in the US. With the Apple iPhone publicly announced, and a rumored “Google Phone” in the works, the mobile phone market is likely to be significantly more “Internet-centric” than ever before. A Google phone could allow people to scan items in-store, then provide “Froogle” links to cheaper prices elsewhere. In response, someone like Amazon would strike a deal with a mobile provider to bundle an application on a phone allowing a “one-click” purchase for any scanable item – with their significant discounting and home delivery as standard. It would be all too tempting for Apple to allow people to scan a CD barcode in order to let people directly purchase the same album on iTunes instead – and save money in the process. All new ways of buying and selling via the phone. Speaking of music, there is about to be an…

Audio Explosion

With DRM finally being pried off music, it will soon be much easier for people to sell audio in interesting ways. Without the need to provide arcane codecs and validation, smart music data distribution services will provide the possibility of audio sales anywhere on the web. So, whilst listening to a radio station, a user will finally be able to draw on a song’s meta-data and provide access to purchase. iTunes, which has long had a near-monopoly on digital music sales will face upstart competition from services like Last.fm and Pandora that can at last effectively monetize their services. These companies will vigorously produce and publicize plug-ins and Web 2.0 widgets to put “purchase” in the path of anyone listening to digital music. This will cut CD sales significantly, further mainstream digital content, bring more and more of the longtail online, and create additional pressure on DRM for all other digital media. All of which will make e-commerce even more of an everyday activity. Which brings us to:

The Rousing Finale

Whether this prediction is “so 20 minutes ago”, it is clear that E-Commerce as traditionally conceived by most companies, is currently lagging well behind digital innovation elsewhere. This means that there is plenty of scope to get out there and create something cool, shiny and new. The advent of broadband, new audio/visual formats, advanced Internet technologies and the sophistication of the online consumer finally make it possible to build a new standard for federated E-Commerce, and usher in a new form of online advertising, sharing and purchasing.

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About Craig Walmsley:

Craig Walmsley joined AKQA London in 1998 as the company’s first “Strategist”. Growing the team over several years, he became Director of Strategy for AKQA London in 2002.

He relocated to the company’s San Francisco office in January 2005 to help add breadth and depth to the office’s digital design and delivery capabilities.

Relocating to AKQA New York in January 2007, Craig is responsible for research, insight, proposition formulation and user experience development across AKQA’s service offerings.

A veteran of the digital industry, he has worked on global projects for such clients as Microsoft, Xbox, Orange, Shockwave, DirecTV, and Coca-Cola, developing solutions on multiple digital platforms.

He has written several articles on the digital and advertising industries, and has been interviewed in a number of leading design and communications titles.

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About AKQA:

A recognized pioneer and innovator, AKQA is an independent agency with offices in London, Amsterdam, New York, Washington D.C. San Francisco and Shanghai. AKQA provides digital strategy, creative and technology solutions to the world's leading marketers, including Coca-Cola, Diageo, Nike, Unilever and Visa.